North Dakota rings in New Year with few new laws

December 31, 2013

BISMARCK (AP) - New rules meant to ensure North Dakota receives timely tax payments on oil royalties from people who live out of state ring in with the New Year, along with a handful of other new laws that deal mostly with taxation.

Beginning Wednesday, oil companies that produce more than 650,000 barrels of oil annually are required to withhold taxes on royalty payments paid to those who live outside North Dakota. Previously, a nonresident who earned a royalty from a North Dakota oil or gas well could remit the taxes to the state, which made some collections lag for a year or more, incoming Tax Commissioner Ryan Rauschenberger said.

Most people who get royalty payments from a North Dakota oil or gas well live out of state but own mineral rights where the well is located, he said.

The tax collections will now go into state coffers immediately, Rauschenberger said. Nonresidents who are paid royalties by companies that produce fewer than 350,000 barrels annually may still remit taxes themselves. The new law affects almost all out-of-state royalty owners, according to the Tax Department.

"The top 20 companies produce 90 percent of the oil," Rauschenberger said.

North Dakota's current oil production is pegged at about 1 million barrels daily.

State Sen. Dwight Cook, R-Mandan, chairman of the Senate Finance and Taxation Committee, said he believes North Dakota is collection most of the taxes its due from oil royalty payments from nonresidents and the new law "makes sure we do."

North Dakota's Legislature normally meets only during odd-numbered years. Most of the 503 laws approved by the 2013 Legislature took effect in July or August. However, all or part of fewer than a dozen laws take effect Jan. 1.

One of the new laws allows the Tax Department to collect a 2 percent tax on prepaid cellular phones and cards to support emergency 911 services.

Rauschenberger said the prepaid cellphone market is growing but has not had to pay the 911 tax levied on landline and traditional cellphone service. The Tax Department estimates the new tax will raise $1 million over the next two years.

Cook, who sponsored the legislation, said more than half the states have adopted similar legislation in recent years.

"It balances the playing field between all the devices out there that can dial 911,"Cook said. "Now, everyone will be paying their fair share of 911 fees."